The financial markets have suffered over the last four years with the mortgage crisis, the Lehman crisis, Greece, Europe and policy paralysis in India- almost an ad infinitum of crisis in the last four years.

In CNBC-TV18's special show Morningstar Investment Conference on Rakesh Jhunjhunwala of Rare Enterprises, Madhusudan Kela from Reliance Capital, Andrew Holland and Sanjoy Bhattacharya shed light on the last four years and perhaps the next four.

Below is the edited transcript of the interview with CNBC-TV18.

Q: You are the big bull. You are the first and the true believer in the Indian story. Where do we stand now?

Jhunjhunwala: My thinking has changed a little. Let me analyse the global situation as I see it. There is a lot of optimism about Europe and America that markets will make new highs. I am a little bearish on the Western world because I think the macroeconomic circumstances are not those in which new highs are made. There are challenges due to debt, demographics and Europe. Secondly, I believe that the infusion of QE2 is not going to make a difference and change circumstances in the Western world.

Third, I think that there is going to be a big fall in commodity prices. From the commodity bull market that started in 1997 or 1998, I think it is either the end of the bull market or we are going to go in for a very severe correction. So, I think these indicators are extremely bullish for India. Also, I think foreign buying is coming because we are the country that is going to benefit the most from the fall in commodity prices. So, a lot of funds hedged that if commodity prices fall, India will benefit.

And I also feel that whatever be the circumstances in India, there is faith in the Indian model. There is no imbalance. There is a balance of consumption and investment unlike in China. The data is much more trusted in India. I think India has one of the most aggressive monetary policies in the world. So if commodity prices were to fall and the interest rate cycle in India had to reverse, you will be surprised to know that of all the assets with significance in the world, India is one of the few assets in the world which has moved higher from when the QE2 was announced.

So, I have a feeling that if politically things don’t really crack up, with corporate India adjusting to the downturn and a sense of urgency on economic recovery, that there could be the genesis of a market which could go up for a long time.

I also believe that the mother-of-all bull markets is ahead of us. But whether this is the start of that bull market, I don’t know. But surely it could be the start of a market which could see a new high in the next 12-24 months.

Q: Are you contemplating the probability that a new bull market has begun in India?

Jhunjhunwala: I have never seen so much pessimism in the market as was witnessed in June-July. Household exposure to equity is lowest at this moment. Equity is a bad word, the first thing my mother asked me, “you don’t buy any land?” And a lot of people tell me, “What are you doing in the equity markets? You are down from what you were in 2007, five years have passed!”

This was extreme pessimism according to me. When the markets go up, mutual funds face redemptions. There is no participation and there is no faith in equity. Bull markets start when interest rates are highest and there is pessimism. The only thing that I am not so sure of is how fast earnings will go. I think 15-17 percent earnings growth in India is a granted according to me. I would rather look at 18-19 percent.

So, I think today India’s bull markets have never peaked off with out the PE going to 24-25 times earnings. Today, it is at 14-15 times. I still think that the mother of all bull markets is still ahead of us, just for the sheer underexposure to equity. So, I feel that a return of 15 percent and a dividend of 2 percent is a give. So that’s a 17-percent tax free return. I don’t know which asset in India is going to give me with the liquidity and simplicity with which I can invest in equity.

And I don’t have to time the markets. I think if I am a good investor it could go to 24 percent. For me 18-24 percent is a target and I think if you have the mother of bull markets it will go to 30 percent. Just as there is pessimism, there is also the optimism. So, I think the mother of bull market is still ahead of us.

But I am sure that this market is not going to give up without a fight and at this moment that is evident from the way the market is consolidating technically. There are so many scrips that have spent three years between Rs 30-35 for. Now those scrips are beating up on the upward.

Q: And have FMCG, cement, pharma all risen?

Jhunjhunwala: If you call me a big bull, this big bull is also approaching the market with suspicion for what could be a one-third chance. So, I am bullish in the short-term, medium-term and long-term. And I reserve the right to be wrong.

Q:Rakesh’s point is worrying me that Indians don’t invest in Indian equity. Mutual funds have faced redemptions, and if one goes through the shareholders list, one can draw a basic compass around South Bombay and those are the people who own equity. Aren’t these distributors doing their job or what do they need to do to sell Indian equities?

Kela: We have done our part and we have interacted with many of them and multiple number of times. Looking at the data from January 2009 till last month, there is a redemption of Rs 41,000 crore from mutual funds in India. Someone was saying that out of the financial savings, it is a negative contributor for the market rather than positive.

People made too much money in gold and property in the 2007 bull market. The new thing which we have heard from Rakesh is that his mother asked him why he is not buying land, so in a way that is corroborating the prevailing sentiment that everyone else is making money in property and gold, so people are getting trapped in their own success.

Essentially, if you ask someone where I should put money today, equity as Rakesh said is a bad word and it has not performed well. So, one can’t blame people for not putting in money in equity. Four years back, if I didn’t put money in equity and I put it in property or gold one would have made money.

Q: Has a new bull market been born?

Holland: I am not so sure. To try and argue against Rakesh is always difficult, but we are part of own problem here listening to what Madhu was saying as well. Last December, everyone was saying don’t touch equities, don’t do this, don’t do that, similarly in June, July and all of a sudden the market goes up and we are seeing a new bull market.

So, I am not so sure if we are in that bull market yet, there is lot of headwinds there. The markets will continue to grow at the same rate as earnings growth. So, I am looking at 10-15% for 2013-2014. So, one will see a 10-15% rise from here which would take you to new highs.

I am not saying we are not going to go to new highs, but is this the beginning of the bull market? I am not so sure that I will be jumping into high beta, high debt and questionable management companies at the moment. That time will come when liquidity is just too strong, but at the moment I would still stick to the good defensives, good cash flows and good quality managements. Those will be the ones which will make the money over the next year. As regards to the global environment, we are kind of writing off the US and Europe.

When I look at the US, despite all its problems over the years, it has this ability and knack to just reinvent itself. Who would have thought six months ago, may be three months ago with all jumping around and saying, you know what, Apple sales are going to add to 0.5% or nearly 1% to GDP of America and that’s how the US reinvents itself. There are problems in Europe, but they are doing exactly what US did, throwing money at it, keeping the tailwinds down until they can start to get growth back again.